Voluntary Provident Fund(VPF) Vs Public Provident Fund(PPF)- Where should you invest?

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Voluntary Provident Fund(VPF) Vs Public Provident Fund(PPF)- Where should you invest?

Investing in the right financial instrument is vital to increase one’s earning potential. While a good investment is more about balancing risks and rewards, the amount of return one gets depends on how much risk one is willing to take. However, not all investments assure high returns. 

With multiple investment options, it becomes more difficult to zero in on the most suitable scheme. PF schemes like EPF (Employees’ Provident Fund), NPS (National Pension Scheme), PPF (Public Provident Fund), and VPF (Voluntary Provident Fund) are some of the excellent options for investments as well as tax benefits.

Who can invest in Public Provident Fund(PPF)?

Any individual – a salaried individual, a student, self-employed, or a retired person—any citizen living in India can open a PPF account. But, the non-resident Indians are not qualified to open PPF accounts. However, a citizen of India who becomes an NRI after opening an account is eligible to hold the account until maturity. As per the law, an individual is allowed to open only one PPF account.

How does a PPF account work?

PPF is one of the most popular investment schemes. It is a long-term investment guaranteed by the government with a lock-in period of 15 years, assuring returns and fund protection. It comes under the Exempt- Exempt-Exempt regime which means that the contribution to the fund, the interest earned, and the redemption- all are exempt from Income Tax.

  • Applicability
    Anyone can open a PPF account; it has no relation with the employer. Individuals can open a PPF account at post offices, nationalised banks, and a majority of private banks. Some banks even permit banking users to open a PPF account online. Even a minor is eligible to open a PPF account along with a guardian.
  • Contribution
    It is fixed-income security where one has to make a minimum investment of Rs. 500 and a maximum investment of Rs. 1,50,000 in a year. Failing to deposit the minimum amount of Rs. 500 on the completion of the financial year leads to the account being designated as inactive. The account can be revived by paying a penalty of Rs. 50 for every financial year the account has been inactive. However, it is also not compulsory to contribute to PPF.
  • Returns
    Currently , PPF accounts offer an interest rate of 7.10 per cent. This return rate is for the quarter ending March 2021. The government sets the interest rate every quarter. Investment in PPF allows taxpayers to seek tax exemptions of up to Rs. 1,50,000 in a year.

 What is a Voluntary Provident Fund (VPF) Account?

An extension of the Employees’ Provident Fund (EPF), the Voluntary Provident Fund account is another investment option that helps a salaried individual to plan and save for their retirement. Employees working in registered companies can willingly contribute any percentage of their salary to their PF account.

How does a VPF account work?

The contribution for VPF does not include the compulsory deduction of 12 per cent of the basic salary. The employers have the right to withdraw funds from VPF accounts as and when required to meet the financial expenses. However, if an employee withdraws funds from a VPF before 5 years, the amount will be taxed.

  • Applicability
    No employer can force an employee to contribute to the VPF. It can be accessed only by salaried individuals and is similar to EPF. It allows an extension where an employee can contribute even more than the stated limit, but the employer’s contribution will remain the same. For VPF, one has to consult their organisation’s HR department to apply for the same.
  • Contribution
    For VPF, there is no maximum or minimum contribution. However, the contribution is restricted to 100 per cent of the salary plus the dearness allowance. Under section 80C of the Income-tax Act, 1961, VPF offers tax exemption up to Rs. 1.5 lakh in a financial year. PPF also gives this exemption. In the budget for 2021, there has been a proposal to reduce the deduction on return received on VPF.
  • Returns
    A VPF account’s interest is the same as an EPF account, which is 8.5 per cent for the fiscal year 2020-21.

VPF or PPF – Where to Invest?

We have compared the features of both the investment options, so that the investment decision becomes easier for you.

Features Public Provident Fund Voluntary Provident Fund
Nature Savings scheme Retirement cum Savings scheme
Eligibility Any citizen living in India Employed individuals
Investment duration 15 years Until one retires or resigns, whichever is earlier
Extension beyond maturity Can be extended in 5-year blocks No extension
Tax benefit As per section 80 C As per section 80 C
Withdrawal 15 years As and when required
Rate of interest Lower (currently 7.1 per cent) Higher (currently 8.5 per cent)
Loan 50 per cent after 6 years Partial withdrawals are allowed


 Both PPF and VPF have their own merits and demerits. If the savings are for retirement, then one should consider VPF. If there are long-term goals like children’s marriage or higher education and medical issues, and so on, then opt for PPF. In the case of a higher tax slab rate and higher contribution for tax-free gains, it is advisable to consider both alternatives at a time.

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NPS or PPF? Where should you invest in?

Home » Investments » Saving Schemes

National Pension Scheme(NPS) or Public Provident Fund(PPF)? Where should you invest in?

When it comes to investment avenues, there are too many to count. If you look out into the market to find avenues for saving your hard-earned money, you would be spoilt for choice. There is a range of market-linked and fixed-income savings avenues that help you save, and also plan your income tax returns. Two such avenues that are quite popular with investors include the National Pension Scheme (NPS) and the Public Provident Fund (PPF). Which among these, do you think, is the best?

To know which avenue is better, you first need to understand these avenues in detail. So, let’s analyse the two – 

Understanding NPS – What is National Pension System?

The National Pension System (NPS) scheme is a retirement-oriented saving scheme. The Government launched the scheme to help investors accumulate a retirement corpus and receive pensions after maturity. The Government-sponsored pension scheme invests your contributions into market-linked avenues, helping you to earn inflation-adjusted returns.

Understanding PPF – What is Public Provident Fund?

The PPF scheme is a fixed-income saving scheme. The scheme runs for 15 years, and the tenure can be extended in blocks of 5 years. You are required to deposit a minimum amount into the PPF account every year, and your investment would earn a fixed rate of return, determined by the Government.

NPS vs PPF – Comparison between the two

Here are some factors which differentiate these schemes –

  • Eligibility 

Resident individuals and NRIs aged 18 to 60 years can invest in the NPS scheme. The PPF scheme, on the other hand, is open for resident Indians only. There is no age limit for PPF investments, and an account could be opened in the name of a minor too.

  • Market exposure 

NPS is a market-linked scheme, like mutual funds, where the returns are not guaranteed. Your investments are exposed to the market through different funds (equity, debt, etc.), which are managed by a fund manager. Returns depend on the performance of the underlying assets of the fund. 

The PPF scheme, on the other hand, does not expose your investments to the market. The returns are fixed and do not depend on market performance. The current rate of interest under the PPF scheme, till 31st March 2021, is 7.1% per annum. 

  • Tenure

The NPS scheme runs till you reach 60 years of age. You can defer the vesting age to 70 years too if you want. The PPF scheme, on the other hand, runs for 15 years, which can be further extended in blocks of 5 years, for as long as you want.

  • Investment amount

The minimum amount to open a Tier I NPS Account is INR 500. Thereafter, the minimum amount of a contribution is INR 500, and a minimum deposit of INR 1000 is needed in a year. For a Tier II account, you need a minimum amount of INR1000. Thereafter, INR250 should be deposited every year. There’s no limit to the maximum deposit that you can make.

You can open a PPF Account with INR 100 only. However, a minimum deposit of INR 500 is required in a year, and the maximum deposit limit is INR 1.5 lakh per annum.

  • Benefit on maturity

On maturity, you can withdraw up to 60% of the corpus in a lump sum. The remaining corpus, however, would be used to pay you pension. You can choose from different annuity options under the scheme. 

However, in the case of PPF, you can withdraw the entire amount in a lump sum when the scheme matures.

  • Premature withdrawals and exit facility

NPS has a lock-in period of three years and allows premature withdrawals after that. You can withdraw up to 25% of the corpus for specific needs, like funding higher education, buying a house, etc. If you exit from the scheme before maturity, you would be allowed to withdraw only 20% of the corpus in a lump sum. The remaining 80% would be used to pay annuities.

In the case of PPF, there is a lock-in period of 6 years. Partial withdrawals are allowed from the seventh year of investment. However, you can avail of loans between the 3rd and 6th year. You can avail of a loan of up to 25% of the PPF account balance at the end of the 2nd year, or at the end of the previous year. You can exit from the scheme and close your account only in specific instances like medical treatments or higher education.

  • Income tax benefits

The NPS account allows you to save tax in multiple ways. The amount invested is allowed as a deduction under Section 80CCD (1). The limit is INR 1.5 lakhs, including the deductions under Section 80C. You can claim an additional deduction of up to INR 50,000 under Section 80CCD, (1B) by investing in the NPS scheme. Moreover, if your employer also contributes to the NPS scheme on your behalf, an additional deduction is available under Section 80CCD (2). Partial withdrawals are tax-free, and so is the lump sum amount that you withdraw on maturity. The annuity payments, however, would be taxable in your hands.

PPF is an Exempt -Exempt-Exempt scheme. This means that it allows tax benefits on investment, interest earned as well as on maturity proceeds. The investment qualifies as a deduction under Section 80C up to INR 1.5 lakhs. The interest that you earn and the amount that you receive on maturity also attract income tax exemption and are completely tax-free in your hands.

NPS Vs PPF: Which is a Better Option to Build a Retirement Corpus?

Both the schemes have their comparative advantages over each other. Have a look –

6 reasons for investing in NPS

  1. Market-linked returns from investments management by expert Pension Fund Managers.
  2. Additional tax benefits under Section 80CCD (1B).
  3. Lifelong income in the form of annuities.
  4. Short lock-in period and premature withdrawal facility.
  5. Choice of investment funds and investment strategy.
  6. Earmarked retirement corpus.

6 reasons for investing in PPF

  1. Fixed returns for risk-averse investors.
  2. Tax benefit on investment, returns, and maturity benefit.
  3. A long-run debt option with disciplined investing.
  4. Small investment amount needed.
  5. Ease of account opening through banks and post-offices.
  6. Availability of loans against the deposit.

NPS vs PPF – Where should you invest in?

You should carefully assess your investment needs, goals, time horizon, and risk appetite, and then make a choice. If you want to have a dedicated retirement fund accumulation and don’t mind market risks, NPS would be a suitable investment avenue. However, for fixed returns and for saving for other goals, you can pick PPF. You can also invest in both NPS and PPF for a diversified portfolio and for meeting the different investment needs.

So, understand what these avenues are all about, their features, and their differences. Then make a choice depending on your needs and strategy. 

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Sukanya Samriddhi Yojana(Part 2)|Small Saving Scheme|By Govt. of India

Description :

Published on Feb 25, 2019

In Part 1 of this scheme we discussed the outlines of the fund, now let’s dive a little deeper in understanding the key features of this investment scheme:-

1) Who can invest? (age group)

2) Requirements(upper and lower limits)

3) Withdrawal.

4) Premature closure.

5) Provision for Nomination.

6) Account Holding type.

7) Principal protection.

8) Inflation protection.

9) Where do you open an account?

10) Documentation required.




Let’s have a look at the key features of this particular investment option talking about who can invest in this any Indian resident a parent or a legal guardian can make this investment for the purpose of benefiting the girl child.


In terms of the age barrier parents and legal guardians can open this particular account for a girl child who is 10 years or less of age.


In terms of requirements it is required that you make a minimum deposit of rupees thousand at least every year in case in any particular year if the investment has not been made it can be initiated from the next year by paying a penalty of fifty rupees the upper limit of this investment is 1.5 lakhs and this 1.5 lakh investment also gets you a tax benefit you can open a maximum of two accounts for two different girl childs a third account can be open for investment if three girls are born the first time or twin girls are born the second time.


The deposit earns a return of 8.5% percent which is reviewed and revised quarterly in line with other small savings schemes of the government.


Talking about the withdrawal it has a minimum holding period of eight years and matures twenty-one years after the initial investment has been made.


Premature closure of this investment is only allowed in the extremely unfortunate event of loss of life of the girl child.


Talking about the nomination facility there is no nomination facility allowed as for this investment.


Talking about account holding types this particular investment as mentioned earlier can be made by the parent or the legal guardian for a girl child.


In terms of capital protection since it has been backed the government of India your capital or principal investment is protected.


In terms of inflation protection there is no inflation protection because inflation is an ever changing number however these investment rates remain range-bound in terms of withdrawing this amount fifty percent of this amount can be withdrawn at the time the girl child turns 18 the balance can only be withdrawn if the investment has completed 21 years from the date that you began it.


in terms of where you open this account this particular account can be opened in any post office which has a Savings Bank facility or in any branch of a commercial bank which has been authorized by the Government of India in terms of documentation required to open this particular investment the birth certificate of the child is required along with ID proofs of the parent or the guardian such as the pan card an aadhar copy or any other address proof typically your driver’s license your voters ID etc at time of opening this account the original ID proves as well as the birth certificate has to be taken for verification.

Sukanya Samriddhi Yojana(Part 1)|Small Saving Scheme|By Govt. of India

Description :

Published on Feb 25, 2019

In today’s video, we will discuss the small saving scheme by the Government of India which is Sukanya Samriddhi Yojana which falls under the initiative of Beti Bachao Beti Padhao.

Let us look at the most relevant questions about the scheme:-

1) To whom is this scheme most relevant?

2) To whom is this scheme not ideal?

3) What kind of risk is involved?

4) What are the returns?

5) Is the scheme tax efficient?

6) What is the holding period?

7) When can you withdraw your money?

8) Does the scheme assure investment safety?

9) Is it inflation adjusted?



Hey everyone, today we will be talking about the small saving scheme by the government of India known as the Sukanya samridhhi yojana, the Sukanya Samridhhi Yojana is specifically meant for parents with a daughter and wanting to save and invest their money for their benefit this, saving scheme falls under the initiative of the government of India known as the beti bachao beti padhao.

  • Suitable for?

The sukanya samridhhi yojana is ideal for parents with a lower risk appetite who want a short returns or fixed returns at the end of a period towards saving for their girl child.

  • Not Ideal for?

It is not suitable however for those who have a higher risk appetite and have the willingness to make investments into instruments which offer a higher return, there are similar options for similar investors which could probably be equity mutual funds if we have a time frame of 15 years or longer like you might have in the case of sukanya samridhhi yojana you are probably better off investing into equity mutual funds, another option which I might not urge you as much to do is investing directly into stocks.
Lets look into certain details with regard to the Sukanya samridhhi yojana.

  • What kind of risk is involved?

Talking about risk this scheme is risk free and is backed principally by the government of India.

  • What are the returns?

In terms of returns like in the case of any other small saving scheme these returns are revised every quarter the current interest rate on this is 8.6%.

  • Is the scheme Tax efficient?

In terms of tax efficiency the sukanya samridhhi yojana is extremely tax efficient becasue it follows the exempt-exempt-exempt status, which means your investment is exempt the interest you accumulate on this investment is also exempt and at the time of maturity as well the amount that is credited to you is exempt.

  • What is the holding period of investment?

Talking about the investment holding period, this particular investment matures 21 years after you actually make the investment, it has a minimum holding period of 8 years in terms of withdrawal you can withdraw after your girl child turns 18.

  • The aspect of Investment Safety

Investment safety, as I mentioned earlier having been backed by the govt. of India, this particular investment is protected for its capital.

  • Inflation-adjusted return

Talking about inflation-adjusted return which is specifically something that we should consider in scenarios when the inflation is high this particular investment may not be suitable, it is only well suited when the inflation rates are low. also to keep in mind is the fact that education inflation is typically a double-digit number and not in line with the returns you get in this particular investment option.
Thank You

Public Provident Fund(PPF)|Risk averse investors|Tax Benefit

Description :

Published on Feb 20, 2019
Today we are talking about the Public Provident Fund(PPF):
1) This fund is most suitable for a very long period of investment of 15-20 years and investors who are risk-averse to achieve long term financial goals.
2) Not suitable for investors who have a high risk appetite in this case you can opt for equity based investments(equity mutual funds, direct stock investment, NPS)
3) Risk on PPF is ‘zero’
4) Return on PPF is 8%.
5) Tax Benefit- deposit is exempted, interest accumulated is exempted, and at maturity is exempted(EEE status)
6) The holding period is 15 years with an extension of 5 years.
7) Withdrawal(premature withdrawal in case of death of account holder or post 5 years)
8) Investment safety.
9) Return on investment- real returns are earned when returns from PPF is higher than inflation rates.


To know which one to pick, know your own goals and risk profile.

We here at Finity are happy to guide you every step of the way on the easiest direct mutual fund platform in India.


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Hi everyone we’re now gonna be talking about the PPF or the Public Provident fund.

  • Who is the public provident fund investment most relevant for?

It is relevant for risk-averse investors who have the appetite to stay invested for 15 years or more to achieve long-term financial goals in this process they are also seeking guaranteed returns through regular investments the PPF investment is not ideal for investors who are willing to wait for a 15 year period but also have a high risk appetite in case of a high risk appetite it is probably more suitable to make equity based investments a similar investment options for an investor who has the waiting period of 15 years could be equity mutual funds direct stock investing or the national pension system for retirement.

  • Risk Factor

The risk on the PPF is absolutely zero hence it is more suitable for risk-averse investors.

  • Returns

The returns of the PPF currently are 8% which are changed quarterly by the Ministry of Finance are in line with the current G sec rates.

  • Tax Efficiency

In terms of the tax efficiency the PPF are popularly known for its exempt exempt exempt or EEE status

  1. The deposit that you make.
  2. The interest that you accumulate.
  3. At maturity.

all these three amounts are tax-free the holding period on the PPF is 15 years plus you have the opportunity to make an extension for five years.

  • Withdrawal

Premature withdrawal of the PPF happens only in the event of an account holders death or post five years in case of any specific conditions.

  • Investment safety

It is a government seem so the capital is completely secured and protected so is the PPF return inflation adjusted or inflation friendly only in the scenarios that the return on the PPF is higher than the current inflation does it earn real returns.

Thank You